Vancouver (Reuters) - The government of British Columbia said on Monday it cannot support construction of Enbridge Inc’s (ENB.TO) C$6 billion ($5.90 billion) Northern Gateway oil pipeline project unless the province receives more fiscal benefits from the project.
In its first official comment on new oil export pipelines planned by Enbridge and Kinder Morgan Energy Partners LP KMP.N, the government of Liberal Premier Christy Clark said the province will demand a bigger slice of the about C$81 billion in overall tax revenue Northern Gateway that is expected to generate in its first 30 years of operation.
Under the current system, British Columbia would receive 8.2 percent of total tax revenue from the line, an amount it considers unacceptable.
“Given that B.C. would shoulder 100 percent of the marine risk and a significant portion of the land-based risk, we do not feel the current approach to sharing these benefits is appropriate,” Terry Lake, the province’s environment minister, told reporters. “A fair share of benefits will be the focus of negotiations should there be any interest in pursuing a new heavy oil pipeline in British Columbia.”
Canada’s government and its oil producers are backing construction of new export pipelines to British Columbia’s Pacific Coast to take oil sands crude to high-paying markets in Asia and elsewhere. Rising output has resulted in a glut of oil and lower prices in the U.S. Midwest, which now takes nearly all of Canada’s exports
Along with a larger share of revenue, the Clark government laid out four other conditions that must be met before it can back any new line. Any proposal must successfully complete an environmental review; it must have top-notch marine spill prevention and response systems; it needs industry-best measures to prevent and mitigate spills on land; and the province’s First Nations aboriginal communities must be consulted and must benefit from any new pipeline.
Pipelines that cross provincial borders are federally regulated and approved, but Lake said the province would be a crucial player in the process of getting the pipeline built as there will be “scores of provincial permits that will be necessary”.
“We will have to give due consideration to each one in terms of the criteria that are around those permits, the necessary commitments that are made around those permits and, of course, the issue of being able to supply the power necessary through B.C. Hydro,” he said.
B.C. Hydro is the provincial government-owned electricity utility.
Two new oil pipeline projects are being proposed to run through British Columbia.
Enbridge’s Northern Gateway pipeline would ship 525,000 barrels of oil per day derived from the Alberta tar sands to Kitimat, British Columbia, on the Pacific Coast, where it would be loaded onto tankers. A second line would take 193,000 bpd ultra-light crude and natural-gas liquids into Alberta.
As well, Kinder Morgan Energy Partners LP KMP.N plans to expand its 300,000 bpd Edmonton, Alberta, to Vancouver Trans Mountain line to handle 750,000 bpd.
Enbridge said it welcomed the B.C. government’s input. “We have a strong commitment to working with the B.C. government. We will continue to work with the B.C. government to find means and ways to further address their concerns,” spokesman Todd Nogier said.
A Kinder Morgan spokesman said the company will follow all necessary regulatory steps as it moves its project forward.
“We support the intention of the minimum requirements that have been outlined by the province,” Andrew Galarnyk said.
Separately, federal Natural Resources Minister Joe Oliver said in a statement that only those resource projects that “meet our rigorous environmental standards will go forward”.
Alberta premier Alison Redford, whose province is the center of Canada’s oil industry and who has been championing a national energy strategy, hinted that B.C.’s announcement was not in the best interests of the country.
“Leadership is not about dividing Canadians and pitting one province against another — leadership is about working together,” she said in a statement.
Public hearings on the pipeline are taking place in communities along the pipeline’s route across northern British Columbia and into Alberta. Opposition from environmental and aboriginal groups due to concerns about possible oil spills has led to delays in the project, which Enbridge aims to complete in 2017.
Despite the conditions laid down by the province, environmental activists were not appeased.
“There is nothing in the announcement today that will satisfy people of the North,” said Pat Moss, coordinator of Friends of Wild Salmon, an environmental group based in Smithers, in northern British Columbia.
Writing by Scott Haggett and Nicole Mordant; Editing by Gerald E. McCormick, Leslie Gevirtz,; and Peter Galloway